ZDONK

I had a random conversation a few weeks ago about Roland Emmerich and his new movie, “2012″. While I’m not a huge fan of his last few movies (I didn’t even see “10,000 BC”), I was very interested to hear about the unconventional creative process he undergoes in preparation for a film. Supposedly, before an idea is flushed out into a first draft, Roland Emmerich visualizes the three most intense, climactic scenes and then goes backwards, writing the script around each of the scenes (think the White House being blown up in “Independence Day” or tornadoes swirling through LA in “The Day After Tomorrow”). I thought it was interesting that he conceptualizes three potentially non-linear scenes and then builds characters and a story around them.

I think it’s safe to say that the scene used in the teaser tailer for “2012″ is one of those three scenes…water washing over the Himalayas is pretty f’ing intense.

After speaking about the effects of the financial crisis on the current studio model in our last blog post, we decided to shift our attention towards the effects of consumer behavior in a recessionary economy. Will the studios be altering the types of films they distribute because of what they believe consumers want to watch during hard economic times?

For this question we spoke with Joe Roth, CEO of Revolution Studios and a ZDONK board member:

One of the first things Joe pointed out was how escapist movies like Madagascar 2, Quantum of Solace and Twilight have done better than expected, whereas the more serious, heavier films aren’t doing as well -– “It’s already bad enough, movie-goers need an escape.”

Sure the public enjoys serious films, considering the academy awards are just around the corner, but does that actually translate into box office sales? Will movie-goers continue to spend $10 at the theater to not laugh or be in awe?

The public’s willingness to spend at the box office isn’t in drastic decline, but the types of movies that drive people to the theaters could be changing. This phenomenon will certainly impact the films studios choose to distribute, especially if they plan to trim their slates to cut costs. Joe says that the films that will flourish will be those that “offer the highest value to the consumer — Twilight for girls, Madagascar for kids, Bond for men.”

His perception of consumer behavior in a recessionary economy is fairly straightforward: “People are guarding their money and they’re not going to go for anything they’re not sure of.” So, at a time when cash is king, I think it is fair to conclude that studios will only be financing “tried and true concepts”.

As the recession deepens, this trend will only be strengthened as studios cut their slates and consumers opt for a rental (or YouTube) instead of heading to the theater and paying $10. This could mean tough times for production companies without original, escapist material or an already vetted concept to pitch to one of the majors.

Liz Gannes, the editor of NewTeeVee, recently wrote an article entitled “Did All These Fledgling Video Startups Not Get the Message about the Crappy Economy“. As the co-founder of one of these “fledgling video startups” I’d like to thank Liz — we had no idea!

I am being facetious. Her article makes several great (albeit somewhat obvious) points – the media industry is in disarray and advertisers will be cutting their budgets at a startling rate in the coming year. These factors will certainly make it difficult for a startup to be acquired or to generate sufficient revenues.

While these obstacles, amongst others, will be formidable, there are also several opportunities for a well capitalized, “execution based” start-up to seize:

• Talented people of many skill sets are being laid off and will be willing to work for a start-up. Yes, a startup is risky, but apparently so is working for a Lehman Brothers or a Viacom.
• Companies with an “out of the box” business model will fall on more receptive ears when the traditional model falters (especially if the approach can bring cash to the table).
• In the film industry, large studios are undergoing massive restructuring and, potentially, consolidation. This will create a buyers market for young studios able to pick up quality material in turnaround (eg – Summit Entertainment’s acquisition of “Twilight” from Paramount).

Entrepreneurs are natural risk-takers (I left a high-paying job at a bank and now eat Ramen noodles almost every single night), and while this market will definitely be a shakedown for new media, no one is better suited to weather the storm than the entrepreneur. Those who can adapt and manage to keep their heads above water will emerge as the players in a landscape that has yet to be defined.

With the Wall Street spigot drying up, leverage becoming increasingly less viable and media conglomerates lessening the flow of cash to their film operations, Hollywood and the independent film industry will certainly face obstacles when trying to produce and market their product in the coming years. The effects of this are yet to be determined.

Could the balance of power shift away from the studios and transfer to smaller production companies. What could this mean for new media versus traditional forms of distribution? How drastically will studios and film financing firms have to cut their film slates?

These were the main questions we sought to answer when we recently sat down with Don Starr, the CEO of Grosvenor Park (Defiance, P.S. I Love You, Righteous Kill) to discuss the implications of the financial crises on the film industry…

ZDONK: Do you think studios are going to scale back on the amount of movies they’ll be releasing?

DS: Yes. Studios are huge corporations and are hugely dependent on advertising revenue. Just look at the stock performance of Viacom (Paramount). They released Iron Man, Kung Fu Panda and Indiana Jones and still lost $75m this last quarter. They had the three huge hits of the summer and still lost money because they have huge overheads and run this huge physical plant that costs nearly $50m in overhead.

ZDONK: Do you think the major Studios will begin to axe films that are in the late stages of development?

DS: Yes. We used to be able to finance our movies and take them to studios to cover P&A and they’d put up the marketing costs with no difficulty. Now they are thinking twice about putting up the P&A. An example is Paramount who pushed two pre-December 31st releases because those expenses would have gone towards the P&A money. No one wants to distribute in the 4th quarter because no one wants to show a loss today — any expenditure in the 4th quarter has to be accounted for as a loss and the income comes in in the next fiscal year.

ZDONK: Will leverage ratios continue to decrease? How much debt can you use now to finance a film relative to last year?

DS: Five years ago you could have financed 90% of your movie on debt (foreign sales, soft money). Today, if you finance 60% of it with debt you are doing very well. Foreign sales are down, and there is not as much money available per picture as there was 5 years ago. A number of B-title pictures that were financeable 5 years ago are not financeable anymore, unless you put up 100% equity. There is no market for B movies right now.

ZDONK: Will these factors lead to a significant shift in digital distribution?

DS: Yes. Mark Cuban’s theory is that every form of release will happen at the same date. The model will change. It used to be domestic distribution, then DVD, then ancillary sales, including digital. Eventually, it’s all going to be one date, and less reliant on domestic distribution. The cycle will be more reliant on the Youtube’s of the digital world. It’s a less expensive way to distribute a movie.

ZDONK: Do you see a potential transfer of power taking place in the industry?

DS: I think the studios are definitely losing power. Universal’s model is basically based upon getting cheap capital out of General Electric. GE used to charge them very little for their money, but they can’t afford to do that anymore. I think there will be a consolidation of studios. There will be a couple less and it will happen in the next 24 months. If the economy continues to spiral downwards, this could happen sooner.

What does this mean for financing firms such as Grosvenor Park? Don says that if they just continue to maintain their discipline, and put a halt on financing movies in the very near term, they will be ok.

We also talked about the inherent opportunity for smaller studios, free of the weight these mega corporations carry, to be nimble and react to the quality products that are sure to change hands as studios try and find buyers. A great example of this that Don gave was Summit Entertainment’s pickup of the “Twilight” book series from Paramount in turnaround.

DS: Summit, this upstart company, which up until a year ago was this foreign sales company, raised some money and became a domestic distributor. Now they have a huge hit. Paramount was asleep because they didn’t have the new world of Patrick Wachsberger’s who are nimble on their feet.

So, with the current system breaking down, there will be plenty of opportunities for young production companies to take advantage of an emerging new system.

…Interesting stuff.

Bowie-esque Chris Dane Owen shows us that “love has enemies”…

Hello All,

Despite the veiled cheer and joy of the holiday season, there is no denying times are tough. The spirit of charity, gratitude and remembrance has been replaced by tension, chaos and frenzy. Your pockets are empty, prices are only getting higher, and if you’re lucky enough to still have a job, you’re most certainly being overworked…overall I’d say you’re ripe for a cataclysmic breakdown.So as our economy spirals somewhere between rat-crap and the seventh circle of hell, I want to help you all prepare for the highly emotional insanity that approaches. No matter how your personal collapse manifests, who you strangle, or what felony you flee from this year, remember…at least you won’t be as bad as these guys:

Top 5 Cinematic Breakdowns of all time:

5. The Big Lebowski 1998 - Walter Sobchak

Has the whole world gone crazy!? Am I the only one here who gives a shit about the rules!? Mark it zero! You think I’m fucking around? Mark it zero!

4. Swingers 1996 - Mike Peters

We’re gonna spend half the night driving around the Hills looking for this party and then leaving cause it sucks, then we’re gonna look for this other party you heard about. But, Trent, all the parties and bars, they all suck. I spend half the night trying to talk to some girl whose eyes are darting around to see if there’s someone else she should be talking to . . . Half of them are nasty skanks who wouldn’t be shit if they weren’t surrounded by a bunch of drunken horny assholes. I’m not gonna be one of those assholes. It’s fucking depressing. Some skank who isn’t half the woman my girlfriend is is gonna front me? It makes me want to puke.

3. Planes, Trains & Automobiles 1987 - Neal Page

“You can start by wiping that fucking dumb-ass smile off your rosey, fucking, cheeks! Then you can give me a fucking automobile: a fucking Datsun, a fucking Toyota, a fucking Mustang, a fucking Buick! Four fucking wheels and a seat! . . . And I really don’t care for the way your company left me in the middle of fucking nowhere with fucking keys to a fucking car that isn’t fucking there. And I really didn’t care to fucking walk down a fucking highway and across a fucking runway to get back here to have you smile at my fucking face. I want a fucking car RIGHT FUCKING NOW!”

2. A Few Good Men 1992 - Col. Nathan R. Jessep

You can’t handle the truth! Son, we live in a world that has walls. And those walls have to be guarded by men with guns. Who’s gonna do it? You? You, Lt. Weinberg? I have a greater responsibility than you can possibly fathom. You weep for Santiago and you curse the Marines. You have that luxury. You have the luxury of not knowing what I know: that Santiago’s death, while tragic, probably saved lives. And my existence, while grotesque and incomprehensible to you, saves lives…You don’t want the truth. Because deep down, in places you don’t talk about at parties, you want me on that wall. You need me on that wall. We use words like honor, code, loyalty…we use these words as the backbone to a life spent defending something. You use ‘em as a punchline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very freedom I provide, then questions the manner in which I provide it! I’d rather you just said thank you and went on your way. Otherwise, I suggest you pick up a weapon and stand a post. Either way, I don’t give a damn what you think you’re entitled to!

1. Animal House 1978 - Bluto

“Over? Did you say ‘over’? Nothing is over until we decide it is! Was it over when the Germans bombed Pearl Harbor? Hell no! . . . And it ain’t over now. ‘Cause when the goin’ gets tough . . . the tough get goin’! Who’s with me? Let’s go! . . . What the fuck happened to the Delta I used to know? Where’s the spirit? Where’s the guts, huh? ‘Ooh, we’re afraid to go with you Bluto, we might get in trouble.’ Well just kiss my ass from now on! Not me! I’m not gonna take this. Wormer, he’s a dead man! Marmalard, dead! Niedermeyer . . . LET’S DO IT!”

Bonus Breakdown

Goodfellas 1990 - Tommy DeVito

“What do ya mean, funny? Let me understand this cause, I don’t know maybe it’s me, I’m a little fucked up maybe, but I’m funny how? I mean, funny like I’m a clown, I amuse you? I make you laugh… I’m here to fuckin’ amuse you? What do you mean funny, funny how? How am I funny?”